Editorial:

State should protect itself from energy industry bankruptcies

Posted 9/12/19

With coal and other minerals companies going bankrupt at an alarming clip, state lawmakers are considering ways to better protect Wyoming taxpayers and workers.

Last week, the Legislature’s …

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Editorial:

State should protect itself from energy industry bankruptcies

Posted

With coal and other minerals companies going bankrupt at an alarming clip, state lawmakers are considering ways to better protect Wyoming taxpayers and workers.

Last week, the Legislature’s Management Council voted “to create a special committee of lawmakers to try and stem losses from future coal company bankruptcies for both miners and the state,” WyoFile reported.

According to the nonprofit news site, “Priorities for the new committee include securing taxes owed to Wyoming counties, getting the Wyoming attorney general’s office to assist county officials in bankruptcy court and trying to stop companies from ditching their obligations to workers as they reshape and escape debt.”

It’s a wise move for the Legislature to take up the issue, though it’s overdue; much has already been lost.

In a July email to his fellow representatives, Speaker of the House Steve Harshman, R-Casper, noted that tens of millions of dollars worth of federal, state and local taxes have gone unpaid in recent coal industry bankruptcies.

“That [money] is all in the past and likely gone,” he wrote in the email, which was obtained by WyoFile.

In other words, the now-bankrupt corporations running those mines effectively got a cut-rate deal on minerals that belonged to the American public; they failed to pay their share of taxes on resources that are now gone.

Part of the problem is that fighting for tax payments in bankruptcy court is a long, expensive process for local governments, which typically must hire specialized, private lawyers. A few years ago, Campbell County spent more than $1 million in legal fees to recoup $20 million from Alpha Natural Resources. And Campbell County and other governmental entities find themselves in a similar position today, as the company that eventually took over Alpha’s Belle Ayr and Eagle Butte mines, Blackjewel, abruptly shut down operations in July. Hundreds of people in the Gillette area were suddenly put out of work and some $37 million in ad valorem taxes have been left unpaid.

The problem isn’t limited to coal country, either.

Park County and several other Wyoming counties have been fighting in a Texas bankruptcy court with Vanguard Natural Resources, an oil and gas company whose operations include the Elk Basin field and natural gas processing plant north of Powell.

Vanguard not only failed to pay about $880,000 in property taxes here, it also filed a complaint, claiming that Park County should have to refund the $880,000 that it did pay in 2017.

When you add in the taxes from the other counties involved in the litigation, millions of tax dollars are at stake in the fight with Vanguard. A judge has yet to settle the dispute, but the counties have already racked up massive legal bills, being represented by a Texas bankruptcy firm that charges around $565 an hour. Even if Park County prevails and receives the taxes it’s owed, taxpayers will be out the tens of thousands of dollars spent on legal fees.

All of this shows that it’s high time for state lawmakers to better protect Wyoming’s interests.

Among the ideas that will be considered by the Legislature’s new special committee are: requiring companies to pay their property taxes on minerals monthly rather than yearly; enabling the Wyoming Attorney’s General Office to help counties navigate the complex bankruptcy process (presumably at a cost of much less than $565 an hour); and finding ways to give government entities and/or company employees a higher priority in the bankruptcy process, WyoFile reported.

Lawmakers have kicked around the idea of monthly payments for years. It could be a relatively simple step toward minimizing the unpaid taxes when an oil, gas or coal company falls on tough times.

We’re sure such a switch would be inconvenient for mineral producers, particularly smaller ones. However, when a mom and pop store suffers a rash of bounced checks, they don’t just hope things will get better: They start requiring some other method of payment, even if it poses a hassle for their faithful customers.

Of course, in this analogy, it’s some of those long-time customers — juggernauts of the minerals industry — now failing to pay their yearly bills at Wyoming’s “store.” And bigger trouble could be coming, as there have been few signs that the market for fossil fuels will rebound to what it was once.

When Speaker Harshman wrote to state representatives in July about the tens of millions of tax dollars lost to recent bankruptcies, he noted that, “The future risk is larger with lost future production.”

We can and should continue to appreciate our oil, gas and coal producers, but it’s also time for the state to better protect itself and the people of Wyoming for when things don’t work out.

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